Base rate held at five per cent

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In its June meeting, the Bank of Englands monetary policy committee (MPC) has once again held the base rate of interest at its previous level of five per cent.

The move comes amid claims from analysts that the bank is likely to maintain a cautious approach over the coming months as it waits for the economy to settle.

Howard Archer, chief UK and European economist at Global Insight, explains that inflation is likely to reach four per cent during the summer.

Such a figure typically could be seen as a reason for the MPC to raise the base rate in order to limit consumer spending.

But in the present climate Mr Archer suggests that the bank will "tread extremely carefully on the interest rate path".

Speaking last week, he predicted that the committee was "certain" to leave the rate unchanged in its June meeting.

Now he suggests that MPC member David Blanchflower - who has been one of the proponents of a rate cut in recent months - is probably the only member to have voted for such a change this time around.

Mr Archer forecasts that a rate cut will not take place until at least August - and could take until beyond that point to materialise.

The Bank of England, he explains, could well be waiting for a decrease in consumer demand for products to emerge from lower wage growth and tightened finances.

As this converts into less inflation of products from manufacturers and retailers, he asserts that a rate cut could become a more favourable option.

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